Advance Auto Parts 2003 Annual Report Download - page 20

be approximately $130.0 million, up from 2003 reflecting
our intent to own rather than lease a portion of our new
store openings.
Our recent acquisitions have resulted in restructuring
reserves recorded in purchase accounting for the closure of
certain stores, severance and relocation costs and other facil-
ity exit costs. In addition, we assumed certain restructuring
and deferred compensation liabilities previously recorded by
Western and Discount. At January 3, 2004, the restructuring
reserves had a remaining balance of $7.5 million, of which
$2.8 million is recorded as a current liability. Additionally, at
January 3, 2004, the total liability for the deferred compen-
sation plans was $2.4 million, of which $0.6 million, is
recorded as a current liability. The classification for deferred
compensation is determined by payment terms elected by
plan participants, primarily former Western team members,
which can be changed upon 12 months’ notice. These
reserves are utilized through the settlement of the correspon-
ding liabilities with cash provided by operations and there-
fore do not affect our consolidated statement of operations.
We provide certain health care and life insurance benefits
for eligible retired team members through our post-
retirement plan. At January 3, 2004, our accrued benefit
cost related to this plan was $17.4 million. The plan has no
assets and is funded on a cash basis as benefits are
paid/incurred. The discount rate that we utilize for deter-
mining our postretirement benefit obligation is actuarially
determined. The discount rate utilized at January 3, 2004
and December 28, 2002 was 6.25% and 6.75%, respectively.
We reserve the right to change or terminate the benefits or
contributions at any time. We also continue to evaluate
ways in which we can better manage these benefits and
control costs. Any changes in the plan or revisions to
assumptions that affect the amount of expected future benefits
may have a significant impact on the amount of the reported
obligation and annual expense. Effective December 2002,
we amended the plan to only provide benefits for team
members who are eligible at January 1, 2005. This negative
plan amendment resulted in a curtailment gain of $2.9 mil-
lion in 2002, which is being amortized over 12 years to offset
corresponding increases in health care cost trends.
We expect that funds provided from operations and avail-
able borrowings of approximately $122.4 million under our
revolving credit facility at January 3, 2004, will provide
sufficient funds to operate our business, make expected
capital expenditures of approximately $130.0 million in
2004, finance our restructuring activities and fund future
debt service on our senior credit facility through the next
three years.
For 2003, net cash provided by operating activities was
$355.9 million. Of this amount, $124.9 million was provided
by net income and $24.2 million was provided as a result of
a net decrease in working capital, other long-term assets
and liabilities and other operating activities. Significant
non-cash items added back for operating cash purposes
include depreciation and amortization of $100.7 million,
amortization of bond discounts and deferred debt issuance
costs of $5.1 million, loss on extinguishment of debt of
$47.3 and provision for deferred income taxes of $53.7 mil-
lion. Net cash used in investing activities was $85.5 million
and was comprised primarily of capital expenditures. Net
cash used in financing activities was $272.8 million and
was comprised primarily of a $294.2 million decrease in
our net borrowings, $38.3 million of expenses to complete
the redemption of our senior subordinated notes and senior
discount debentures in April 2003, offset by proceeds from
the exercise of stock options of $25.4 million and an
increase in bank overdrafts of $30.2 million.
For 2002, net cash provided by operating activities was
$243.0 million. Of this amount, $65.0 million was provided
by net income and $15.9 million was provided as a result of
a net decrease in working capital, other long-term assets
and liabilities and other operating activities. Significant
non-cash items added back for operating cash purposes
include depreciation and amortization of $94.1 million,
amortization of bond discounts and deferred debt issuance
costs of $16.6 million and provision for deferred income
taxes of $51.4 million. Net cash used in investing activities
was $78.0 million and was comprised primarily of capital
expenditures. Net cash used in financing activities was
$169.2 million and was comprised primarily of $223.3 mil-
lion in net payments on the credit facility and payments to
repurchase and retire outstanding bonds and a decrease in
bank overdrafts of $33.9 million, all offset by $88.7 million
in net proceeds from our equity offering in March 2002, and
$17.4 million in proceeds from team member exercises of
stock options. Additionally, in November 2002, we repur-
chased the entire $10 million of indebtedness under the
industrial development revenue bonds.
In 2001, net cash provided by operating activities was
$103.5 million. This amount consisted of an $11.4 million
in net income, depreciation and amortization of $71.2 mil-
lion, amortization of deferred debt issuance costs and bond
discount of $14.6 million, impairment of assets held for sale
of $12.3 million, amortization of stock option compensation
of $11.7 million and an increase of $17.7 million of net
working capital and other operating activities. Net cash
used in investing activities was $451.0 million and was
comprised primarily of capital expenditures of $63.7 mil-
lion and cash consideration of $390.0 million paid in
the Discount and Carport mergers. Net cash provided by
financing activities was $347.6 million and was comprised
primarily of net borrowings.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (continued)
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